While many companies have struggled in parts of Eastern Europe and Russia, following political instability, Tesco‘s F&F will be opening its first outlets in Moscow, Russia in June. The Russian franchise operator Debruss will also be opening a further store in August in Moscow.
Two out of three of the new Russian ventures will be within Debenhams stores, following the F&F brand launching in the UK and Ireland in 2001.
At an Internet Conference, titled, ‘Wild Wild East- How to succeed in E-Commerce in Eastern Europe‘, Jan Vichr, Founder and Chief Executive Officer of Fashion Days Group highlighted the importance of truly understanding a location for a company to do business there. Vichr focused on Russia and Eastern Europe, presenting expansion as key but locality as even more important for retailers hoping to run a successful global business.
Though it has been a difficult time for Russia over the past year, with political problems and falling oil prices, the country is finally seeing a stronger Ruble, making it a safer investment for the likes of Tesco. Alexei Ulyukayev said last week:
“The economic situation is still complicated, but we are seeing some significant signs of stabilisation”.
Other UK stores that are hoping to see results in Russia include M&S and sports retailers Adidas and Nike. M&S has 15 stores in the Russia and further shops across Eastern Europe, including Croatia, Estonia, Czech Republic, Bulgaria and five in Ukraine.
Though the company‘s financial success is yet to be confirmed and international earnings are expected to be down to £103m, predictions estimate that M&S‘s overall profits will rise 2.4% to £532.7m.
With 320m people in Eastern Europe and 64% internet penetration, retailers that aren‘t focusing on opening physical stores there could be missing out.
Vichr said that internet penetration is below 50% in Ukraine and that there are large gaps between cities and their surroundings in Eastern European countries. The key for retailers is to localize their research to recognise how to access different markets.
In Romania, Vichr has found that favourite brands are generally Italian, while Czech fashion is more relaxed and prefers brands such as Ralph Lauren and Tommy Hilfiger. In comparison, Poland requires price sensitivity.
Philip Rooke, CEO of Spreadshirt, also said that retailers need to look local in order to run a successful global business. He noted how the US and the UK‘s bounce rates were 10% higher than Europe as customers looked to find the best deals. Rooke stresses the importance of knowing your new area and cited that “you have to get natives”.
Vichr advises that retailers pay attention to operational excellence, focusing on processes. He also believes that flexibility and adaptability is key in order to keep up with what is happening in specific areas. Romania‘s VAT in 2010 was presented as an example of how retailers were expected to adapt quickly, as VAT increased from 19% to 24% in the country. In order to survive, global retailers had to adjust and take this into consideration with pricing.
Tesco will need to “test, analyse, learn, adjust, test again” – “there is no time to rest” if the company follows Jan Vichr‘s train of thought.